Electoral bonds: Why it is a giant scam

What the electoral bonds scheme has done is to ensure “ease of doing crony capitalism” and distort the market in a way that amplifies inequality.

Illustrations by Satish Acharya.

Imagine a house.

The residents of this house are general fans of cleanliness. But one day, everyone wakes up to find a small pile of garbage in the living room. The residents shake their heads, point towards the pile, and start complaining.

Suddenly, a cape-wearing bearded man appears and says: “Make me the head of this household and I will ensure that this garbage is cleaned. Not just that, I will ensure that the person who threw this garbage is punished!”

The crowd goes wild. “Such charisma, much amazing oratory. Love it!” they say. “Beardman is the saviour we need!”

Impressed by the bearded man’s resolve and conviction, the residents elect him the head of the household. Now Beardman gets to work. He lifts the carpet in the living room, takes out a broom, and sweeps the garbage under it.

“See? No garbage! It is gone,” he announces triumphantly. “I am the best head of household in this household’s entire existence!” The residents nod and cheer for him.

But the troubles of the household are far from over.

The next day, a bigger pile of garbage appears. People start complaining again, but this time Beardman is standing ready with a broom. He swoops in and sweeps it under the carpet. Every time a pile appears, he does the swoop-and-sweep. He sweeps garbage under the sofa, behind bookshelves, and any other place where it is hidden from the residents.

There is a problem though. The garbage might be hidden from sight, but the stink remains. The house starts stinking of rotten cabbage, and the residents start noticing. They start complaining again, telling the others that Beardman seems to have just hidden the garbage.

“He was supposed to get rid of it, not hide it! That’s why we chose him! Plus, he never punished the person responsible!” cry a few brave souls. But to no avail.

Most of the residents ignore these complainy types. They are operating on the classic “out of sight, out of mind” principle. A lot of them declare themselves “apolitical” and say they cannot be bothered about dirty political affairs. “This is all so toxic. It affects our mental health. Please let us be wilfully oblivious and drown in dance reels.”

Some loudmouth residents even try to convince the others that the stink is actually good for health. “You see, the smell opens up the respiratory system,” say the human megaphones. “All you need to do is follow in the footsteps of Supreme Leader Adarniya Shri Sir Beardman ji. What a visionary. You need to do some yoga like him, right here in the living room, from time to time.”

Beardman is pleased.

He is sure he will be elected as head of the household forever. But suddenly a spectacularly suave spectacled fellow appears in the house and screams: “This house stinks, we need to find the source of the stink! Let me try to move the furniture and look under the carpet!”

And boom. There is garbage everywhere. All around the house. It has reached the bedrooms and even the terrace, it has been buried in the garden, under the lawn, even hidden in the boot of the family car!

“Good god!” says Spectacular Spectacled Man. “This is worse than I thought!”

So, the clean-up was a giant farce, and the stink is worse than ever. What do we do now?

For those of you who are wondering, Beardman is Narendra Modi, the garbage pile is crony capitalism, the people selling stink as fragrance are the mainstream television media, the spectacled man is Justice Chandrachud, and “Operation Swoop and Sweep” is the electoral bonds scheme.

Illustrations by Satish Acharya.

In case you have not noticed, even after all the revelations of the past two weeks, our house, which is India, still stinks. And there is garbage lying around everywhere.

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Narendra Modi showed up on the national political stage when a massive anti-corruption movement was under way in 2012-13. The anger of the public against the United Progressive Alliance government and how it enabled crony capitalists to get undue benefits was at its peak. Modi came in saying that he would fix it all, that he was the man for the job, that cronyism needed to be rooted out through systemic reforms.

When the electoral bonds scheme was introduced in Parliament in 2017 by his government, it was sold as a reform towards cleaner political funding. The then Finance Minister, the late Arun Jaitley, argued that there was too much cash sloshing around in electoral politics and there needed to be a way to ensure that white money comes in through electronic banking channels. He went on to reduce the cash donation cap from Rs.20,000 to Rs.2,000 (mind you, he reduced it; he did not remove it), and he simultaneously put forward the idea of a special form of currency just for political parties: electoral bonds.

The feature that was sold to us normies who could not donate crores of rupees to political parties was that it would ensure only “white money” comes into the electoral system. But for the corporate donors who were actually throwing pots of money at politicians and parties, the most attractive features of the bonds were completely different. They heard a different sales pitch. Allow me to run you through the sales pitch aimed at corporate donors.

One, electoral bonds will ensure anonymity. Since it is a bearer bond with no names on it, donors can be assured that their names will never be revealed. You can now donate without worry or care, without repercussions. Zero accountability. The transactions between the political parties and donors will remain completely hidden from the general public.

Two, not making any profits yet but still want to donate? Don’t worry. We are removing the pesky rule that forces donors to be profit-making entities for three years before giving 7.5 per cent of their average profit to political parties. Now even loss-making entities can donate infinite amounts to political parties. Oh and by the way… the companies don’t even have to be real or do any actual business… you know what I mean, nudge nudge, wink wink.

Three, donations to political parties through foreign sources are now allowed! All you need to do is have an Indian subsidiary, and you can funnel donations through them to political parties. Don’t worry about it, we have retrospectively amended the Foreign Contribution Regulation Act from 1976 onwards. Even your past sins are sins no more.

Quite nice, isn’t it, this whole electoral bonds scam… I mean… scheme? Do consider throwing a lot of money at us political parties. When in power, we will favour you when awarding contracts. And as a bonus, our investigative agencies will look away when you do shady things. Enjoy!

If you are a company that is trying to survive in a basically broken crony capitalist system, this is a very effective sales pitch that you would be tempted to buy into. As a promoter of a company, you are looking to maximise profits, expand your business, and provide more value to your shareholders. In a fair system, you would do it by innovating, putting out the best products, and standing out in a competitive, well-regulated market. But electoral bonds get you a direct entry ticket to the corridors of power, where you can donate to parties and hobnob to get those lucrative government contracts. Regulations and rules be damned. Effective and legalised quid pro quo without ramifications had been achieved.

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Highlights

• Electoral bonds will ensure anonymity. Since it is a bearer bond with no names on it, donors can be assured that their names will never be revealed.
• Even loss-making entities can donate infinite amounts to political parties.
• Donations to political parties through foreign sources are now allowed.

The spin doctors have been hard at work lately, trying to justify the scam. One of those spins is particularly dangerous. It goes something like this: “You don’t understand. This is how business is done in India. Everyone donates to political parties. Companies donated to political parties before, and they are still doing it. Live with it.”

Essentially, the argument boils down to, there was crony capitalism before, there is crony capitalism now, it is just how business is done in this broken country. So, live with it and stop complaining.

If i may say so with peak humbleness, this is an absolute garbage argument. It is also interesting how these arguments mostly come from people who work in finance and are directed at the normies who do not have enough money to participate. The spin doctors want us to cynically accept that the only way to do business is to be corrupt and seek favours from the government by donating abundantly to political parties.

Illustrations by Satish Acharya.

What they do not tell us is that a scam like electoral bonds, which grants special privileges to donor entities, actually distorts the market. New entrepreneurs and small businesses who dream of becoming big are crippled from the start because they can never match the money power of the big donor crony capitalists.

All these young-hopeful normies who bought into the “ease of doing business” narrative should feel extremely betrayed at this moment. Because no matter how hard they try, no matter how much they innovate, and even if they work for 70 hours a week, they will still not be able to advance in this distorted market. They can just watch helplessly as the top 40-odd donor companies continue to steal their share of market value and increase their own exponentially by using shady electoral bonds.

To top it, the herd mentality of the stock market will ensure their share values spike, turning their promoters into the richest business people in the world. Let us face it, there is no morality in stock market trading. The trader herd always flocks towards value, and here we have exponential value being created through pure crony capitalist quid pro quo. Without any accountability or ramifications for doing so.

The young-hopefuls and entrepreneurs of new India need to be the first ones to stand up against this garbage. The old ways of crony capitalist business need to end, not for altruistic reasons but because it is preventing them from participating in a fair market. The market, as it stands, is severely distorted in the favour of the donor capitalists. Instead of cynically pointing out, “Oh this is how business is done”, they should be the ones saying: “Hey, wait a minute, this is not what they taught us in business school! There should be fair competition and solid market regulations. Rules need to apply equally to everyone! This current crony capitalist system is absolute bull, and it needs to stop!”

As we normies continue to move the furniture and carpets to discover more garbage lying around the house, it is worth noting that the primary reason why the explosion of garbage happened was because it was being swept under the carpet. The best way to get rid of the garbage is to see it first, then work towards cleaning it. We also need to make sure that those dumping the garbage are punished and prevent others from doing the same.

If we wish to live in an India that has true “ease of doing business”, then we need to make sure that the perpetrators and benefactors of this scam face some consequences. If we do not, then we will have to live with a broken crony capitalist system that distorts the market and increases the wealth inequality in society exponentially.

I, for one, refuse to live with garbage lying around the house.

Meghnad S. is a journalist, author, and content creator.